The conventional approach to evaluating a law is to examine its effect on proximate behavior. To evaluate a new criminal law, for example, the conventional approach would look to changes in the crime rate. This paper argues instead that laws should be judged by the extent to which they raise housing prices and lower wages. The logic is that the value of a law, much like the value of a lake or a public school, is capitalized into local housing and labor markets. Desirable laws increase housing prices and decrease wages because more people want to live in the relevant jurisdiction; undesirable laws have the opposite effects. Evaluating laws in the manner has several advantages over the conventional approach. First, it employs a more direct proxy for utility. Second, it accounts for all the effects of a law, including hard-to-measure outcomes, unintended consequences, and enforcement costs. Third, it permits direct comparison of different types of laws, which is important in instances where law-makers have limited resources to invest in law-making. Lastly, it sheds light on the distributional consequences of a law. In particular, it makes clear that a significant portion of every law's benefits are reallocated through housing and labor markets to property owners.

Ben Barros

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